‘Protection or Protectionism?’- A legal
deconstruction of the emerging false dilemma in
European integration
N. Countouris and S. Engblom
Abstract
This article engages critically with an emergent rhetoric suggesting that Member States
and trade unions seeking to apply their domestic social standards to foreign service
providers, in the context of what EU lawyers refer to as ‘Free movement of Services’,
engage in practices amounting to economic protectionism. To countervail this rhetoric, the
paper revisits some of the regulatory principles and rationales underpinning the law on
‘Free Movement of Workers’ and draws a number of parallels between them and the
principles that regulate, or ought to regulate, other freedoms that de facto involve the free
circulation of working persons in Europe, albeit under the guise of ‘Free movement of
Services’ or ‘Freedom of Establishment’. It asserts that all market freedoms affecting the
free movement rights of working persons in Europe, ought to be regulated by reference to
what the paper describes as the ‘Equal treatment Principle’ and distance themselves from
any ‘Country of Origin’ rationale.
UCL Labour Rights Institute On-Line Working Papers – LRI WP 1/2015
‘Protection or Protectionism?’- A legal deconstruction of the
emerging false dilemma in European integration
Nicola Countouris and Samuel Engblom*
1. Introduction
This article engages critically with an emergent rhetoric suggesting that Member States and
trade unions seeking to apply their domestic social standards to foreign service providers, in
the context of what EU lawyers know as ‘Free movement of Services’ (FMS), partake in
practices amounting to economic protectionism. We are referring to statements and
arguments developed both in business circles and in legal ones claiming that ‘trade unions
and non-governmental organizations are operating in order to prevent flow of goods and
services from countries of origin where work conditions are worse than in destination
countries’1 or that ‘The Viking Line and Laval case as well as former case law on the posting
of workers show that social policy goals can be used as a pretext for protectionism’.2 This
article argues that presenting the complex processes stemming from the cross-border
provision of services in Europe simply in terms of a ‘protection v protectionism’ dilemma
may be overly simplistic and even misleading. This (false, in our view) dilemma acts as a
distraction and obscures some peculiar dimensions of FMS that if adequately explored ought
to suggest a reconceptualization of the rules shaping some areas of FMS and their
progressive alignment to the EU principles applying in the context of ‘Free movement of
Workers’ (FMW). Under EU FMW law, ‘A migrant worker is subject to the laws and collective
agreements of the host Member State when exercising his profession [and] must enjoy equal
treatment as regards remuneration, stability of employment, prospects of promotion, and
*Respectively Reader in Law at University College London, UK, and Samhällspolitisk chef at TCO – The
Swedish Confederation for Professional Employees. We are indebted with a number of colleagues
for comments and feedback on earlier drafts, in particular with Catherine Barnard, Andrea Biondi,
Paul Craig, Piet Eeckhout, Mark Freedland, Judy Fudge, Frank Hendrickx, and Bernd Waas. The
usual disclaimer applies. An earlier version of this paper was presented at the inaugural Labour Law
Research Network Conference in Barcelona, at University Pompeu Fabra, in June 2013, and at the
UCL Faculty of Laws Research Seminars in January 2014. A slightly modified version of this paper is
to be published in the European Labour Law Journal (2015) 1.
1
Employer’s Confederation of Latvia Joint statement, ‘The Laval case - “Laval and Partners” – clash of
protectionism
and
proportionality
principles
in
the
EU
(2007)
available
at
http://www.svensktnaringsliv.se/multimedia/archive/00009/Joint_statement_9270a.pdf . See also
‘Protectionism
behind
a
smokescreen’
(2007)
available
at
http://www.svensktnaringsliv.se/english/news/protectionism-behind-a-smokescreen_24169.html (last
accessed on 1 July 2013)
2
C. Semmelmann, ‘The European Union's economic constitution under the Lisbon Treaty: soulsearching among lawyers shifts the focus to procedure’ (2010) ELRev, 516,535.
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1
dismissal’,3 a fact that is widely accepted and has never given rise to any protectionist
claims. We believe, and the article will argue, that some services that are particularly labour
intensive (such as those typically associated with the construction, caring, or security
services sectors), or particularly personal, in that they are provided personally or mainly
personally by sole-entrepreneurs, or self-employed persons without employees, ought to be
regulated on the basis of the rules and rationales applying to the free movement of workers,
and in particular by reference to what the article refers to as the ‘Equal Treatment Principle’
(ETP).
In order to advance this claim, the article revisits, and at times engages critically with, two
fairly consolidated orthodoxies in EU free movement law, which in our view have
underpinned and reinforced the status quo that this article engages critically and
normatively with. The first orthodoxy, or dominant view, is that only one of the fundamental
free movement rights protected by the Treaties, that is to say free movement of workers,
deals with the rights of EU citizens to move to another EU Member State (EU MS) for work
related purposes. To quote a recent EU Commission document ‘Freedom of movement for
workers is one of the four fundamental freedoms on which the Single Market is based. …
Article 45 TFEU enshrines the right of EU citizens to move to another Member State for work
purposes’.4 Free movement of workers is no doubt one of, and even the main, Treaty
freedom regulating the rights of EU citizens to pursue work related activities in other MS,
but there is a tendency to overstate its role and forget that ‘freedom of establishment’ (FES)
and ‘freedom to provide services’ (FMS) are also important vehicles to that effect.5
The second dominant view that we seek to engage with is that the law regulating the main
EU free movement rights, that is to say the law interpreting the TFEU provisions dealing with
free movement of workers (FMW, under Article 45), the right of establishment (FES, Article
49), and free movement of services (FMS, Article 56), is inexorably converging towards a
‘market access’ (MA) test where all freedoms are interpreted in a parallel if not identical
way.6 There is no denying that the interpretation of the EU fundamental market freedoms
has been converging towards ‘market access’.7 But we fear that by emphasising the common
threads of this convergence process, EU law is beginning to overlook some minute, but very
important, differences in the way in which the relationship between Host MSs and Home
MSs regulatory standards is squared across the four freedoms, and in particular the residual
3
4
5
6
7
European Commission, ‘Communication from the Commission to the Council, the European
Parliament, the European Economic and Social Committee and the Committee of the Regions
Reaffirming the free movement of workers: rights and major developments’ COM (2010) 373 final, at
12. Emphasis added, footnotes omitted.
European Commission, Proposal for a Directive on measures facilitating the exercise of rights
conferred on workers in the context of freedom of movement for workers’, COM(2013) 236 final,
page 2. Emphasis added.
The draft instrument in COM(2013)236 final, above, explicitly states that FMW ‘needs to be
distinguished from the freedom to provide services, which includes the right of undertakings to
provide services in another Member State, for which they may send (‘post’) their own workers to
another Member State temporarily to carry out the work necessary to provide these services there’,
ibid. p. 16 (emphasis added). Our view is that this distinction is, to put it mildly, overstated.
‘Parallel interpretation’ is the very effective expression used in A. Dashwood, M. Dougan, B, Rodger,
th
E. Spaventa, and D. Wyatt, European Union Law (6 ed, Hart, 2011), at 552.
See in this respect A. Tryfonidou, ‘Further steps on the road to convergence among the market
freedoms’ (2010) ELRev, 35. For an illuminating and critical analysis of market access see J. Snell,
‘The Notion of Market Access: A Concept or a Slogan?’ (2010) CMLRev, 437.
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but extremely critical role of the Equal Treatment Principle (ETP) in the free movement of
workers context in particular.
This article seeks to elaborate on the three interlinked issues introduced above – the false
‘protectionism v protection’ dilemma, ‘free movement of workers’ as the seemingly
exclusive vehicle for EU citizens to move to other MS for work purposes, and the hegemonic
role of ‘market access’ - through four separate but interlinked steps, appearing below in the
four following sections. Section 2 below, briefly explores ‘free movement of workers’ and
the continuing relevance of the ETP in this area of EU law, in spite of the presence of the
‘market access’ principle. This is then followed, in section 3, by an analysis of the law on the
FES of natural persons (FES/NP), where we discuss the extent to which some of the ETP
elements explored in the previous parts have been increasingly overshadowed by a strong
‘market access’ principle that tends to prioritize the rules of the country of origin of the
service provider over the rules of the Host Member state. Section 4 carries out a similar
analysis in respect of ‘free movement of services’, particularly by reference to the case law
on the posting of workers under Directive 96/71,8 and concludes that the ETP is completely
marginalised in this area of EU law, which is almost entirely dominated by a ‘Country of
Origin Principle’ (COP)9 that was, in our view, never intended to have such a hegemonic role.
Section 5 brings the many threads of the article together in order to reassess the ‘protection
v protectionist’ dilemma in light of the normative suggestion advanced in the article, that is
to say that if one is willing to embrace some of the less obvious similarities existing between
some areas of ‘free movement of services’ and ‘freedom of establishment of natural
persons’ and ‘free movement of workers’, the dilemma, and the rhetoric underpinning it,
quickly dissolves.
2. Free Movement of Workers and the ETP
As noted above there is an area of EU free movement law that, in our view and in the view
of many, is fundamentally shaped by the ETP, namely the area of ‘free movement of
workers’ (FMW). By ‘fundamentally’ we mean that ETP is the foundational principle
underpinning the freedom of EU workers to ‘access’ and ‘participate’ in the labour markets
of EU MSs other than their own. Not only is the ETP the dominant regulatory principle of
‘free movement of persons’ but, we will go on to suggest, it is considered as the normative
cornerstone of this area of EU law, enjoying a degree of cogency that few other EU legal
principles have. This degree of cogency has only increased since the emergence of the
notion of European citizenship in the ‘free movement of workers/persons’ context, a notion
that is in many ways founded on the ETP. We believe that at a normative level ETP plays, or
ought to play, an equally central role as far as freedom of establishment of (natural) persons
(FES/NP) is concerned.10 Admittedly in both areas of law, and perhaps more visibly in
8
Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning
the posting of workers in the framework of the provision of services, [1997] OJ L18/1.
9
And which can be sometimes referred to as the principle of ‘portability of home state legislation’, e.g.
by see V. Hatzopoulos, Regulating Services in the European Union (OUP, 2012), p. 225.
10
Hatzopoulos makes a very strong case for ETP playing an important role in freedom of establishment
in general, see his perceptive comment in V. Hatzopoulos, ‘Forms of mutual recognition in the field
of services’ , in in I. Lianos and O. Odudu (eds), Regulating Trade in Services in the EU and the
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FES/NP, the application of the ETP has recently become more nuanced and partly concealed
by the growing hegemonic role of the ‘market access’ principle.11 But, while this shift does
pose some challenging questions to our argument, we would maintain that, in spite of this
move, the ETP has anything but disappeared. In this section we start by outlining briefly the
relevance, role, and rationales of the ETP, its relationship with the MA and COP concepts,
and argue in favour of its suitability as the key regulatory principle in the ‘free movement of
workers’ context.
In the ‘free movement of workes’ context, the ETP receives a broad recognition as a
fundamental principle from primary and secondary sources alike. It is strongly anchored to
the ‘non-discrimination’ principle contained in Treaty provisions and ‘entail[s] the abolition
of any discrimination based on nationality between workers of the Member States as
regards employment, remuneration and other conditions of work and employment’,12 with
the ECJ clarifying that it ‘prohibits not only overt discrimination … but all covert forms of
discrimination which … in fact achieve the same result’.13 This has long been reflected in EU
secondary legislation, with old Reg. 1612/68 providing that EU workers ‘may not, in the
territory of another Member State, be treated differently from national workers by reason of
his nationality in respect of any conditions of employment and work, in particular as regards
remuneration’.14 So, to begin with, the ETP imposes a strong ‘non-discrimination’
requirement on EU Member States but, and this is a crucial contention in our argument - and
one which we further develop below in subsection 2.b - also goes beyond a de minimis
notion of non-discrimination by requiring a Host MS to apply to EU migrant workers its
domestic rules exclusively and exhaustively, that is to say while effectively disregarding any
labour standards of the workers’ country of origin.
The development of the EU citizenship concept, and the adoption of the Citizenship
Directive, have arguable reinforced the ETP in the ‘free movement of workers’ context by
strengthening its ‘non-discrimination’ dimension and, we will contend in the next section,
ought to have expanded it to the broader area of free movement of persons, including to
‘self-employed persons’, since most Free Movement rights included in the Directive apply
equally to ‘workers or self-employed persons’.15 The ECJ famously posited in Martinez Sala
that ‘the Treaty attaches to the status of citizen of the Union the rights and duties laid down
by the Treaty, including the right … not to suffer discrimination on grounds of nationality’.16
Unsurprisingly Part Two of the TFEU refers to ‘Non-discrimination and Citizenship of the
Union’ making an ‘express linkage between the prohibition on nationality discrimination,
action to combat other forms of discrimination, and the primary rights of EU citizenship’.17
WTO: Trust, Distrust and Economic Integration (CUP, 2012), at 89.
Since Case C-55/94 Gebhard the ECJ has indeed started engaging more systematically with the
‘market access’ principle in this area of FMP, by suggesting that even non-discriminatory measures
may hinder market access, and thus fall short of EU law requirements.
12
Article 45(2) TFEU.
13
Case C-33/88, Allué and Others v Università degli studi di Venezia [1989] ECR 1591, para [11].
14
See in particular Article 7 of old Reg. 1612/68, now effectively reproduced by A 7 of Reg. 492/2011.
Our emphasis.
15
E.g. Article 7 of the Directive.
16
Case C-85/96, Martinez Sala, para [62].
17
N. Nic Shuibhne, ‘EU citizenship after Lisbon’, in D. Ashiagbor, N. Countouris, I. Lianos (eds), The
European Union After the Treaty of Lisbon (CUP, 2012), 136.
11
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We should note that EU law is not the only legal system which includes a principle of equal
treatment for migrant workers. For instance both ILO conventions dealing with migrant
workers expressly contain provisions regarding equal treatment. Article 6 of Convention No
97 stipulates that members for which the convention is in force undertake to apply to
immigrants lawfully within their territory treatment no less favourable than that which is
applies to their own nationals in respect to e.g. remuneration, hours of work, paid holidays,
memberships of trade unions and enjoyments of the benefits of collective bargaining. Part II
of Convention No 143 goes further, requiring not only the repeal of statutory provisions or
administrative practices that are discriminatory, but the positive action by the public
authorities to promote equality of opportunity and treatment in practice. As we will discuss
further in the conclusion of this article, under Article 19(4) of the Council of Europe´s
European Social Charter (Revised) the parties undertake to secure for ‘workers lawfully
within their territories’ treatment ‘not less favourable than that of their own nationals’ in
respect of e.g. remuneration and other employment and working conditions, membership of
trade unions and the enjoyment of the benefits of collective bargaining. An important
difference between these provisions and Article 19 TFEU is of course that the latter only
applies to EU citizens, excluding third country nationals.18 Finally, and going back to the EU
legal order, it is worth recalling the private international law approach endorsed by Articles 8
and 9 of the Rome I Regulations (RIR)19 in the case of ‘individual employment contracts’.
While Article 8 embraces, in the first instance, a ‘choice of law’ approach and, failing that, a
COP approach, Article 9 provides that, ‘irrespective of the law otherwise applicable to the
contract’, any ‘overriding mandatory provision’ will have to be applied. As noted by Merret,
‘This provision is particularly important in employment cases because the statutory
employment rights granted to employees are ‘mandatory rules’.20 Barnard rightly notes that
both the RIR and its predecessor the Rome Convention 1980, ‘appears to endorse this
position in respect of migrant workers and possibly in respect of posted workers’, though –
as it will be discussed below – ‘the Posted Workers Directive […] casts serious doubt on the
territorial application of national labour law to posted workers’,21 and in her work aptly
contrasts the ‘labour law perspective’ traditionally adopted under the Rome Convention,
with the ‘single market’ approach currently endorsed by the CJEU.
a. The rationale of the ‘equal treatment principle’ in the ‘free movement of workers’
context
There are a number of justifications explaining the dominant role of the ‘equal treatment
principle’ (ETP) in the ‘free movement of workers’ (FMW) context. Some of them are
economic or political while some others are more principled in nature. To begin with, the
ETP has been both an economic and political precondition for the introduction and
functioning of FMW, and the common market at large. To borrow the words used in the
1956 Spaak Report the ETP was one of the ‘conditions économiques générales qui
permettront ouvrir largement les portes aux travailleurs’ in that
18
Though admittedly judgments like C-256/11, Dereci, go a long way in minimising this distinction.
Reegulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the
law applicable to contractual obligations (Rome I) [2008] OJ L 177/6.
20
L. Merrett, ‘The Extra-Territorial Reach of Employment Legislation’ (2010) ILJ, 355, 360.
21
C. Barnard, ‘The UK and Posted Workers: The Effect of Commission v Luxembourg on the Territorial
Application of British Labour Law - Case C-319/06 Commission v Luxembourg , Judgment 19 June
2008’ (2009) ILJ, 122, 122-123.
19
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‘if on the one hand, every discrimination between national workers and immigrant
workers is effectively prohibited, and if, on the other, either by the law of the State,
or through the action of trade unions, any kind of fall of wages is in principle
excluded, the employers will have no incentive to request more migrant labour force
than what is actually needed to fill the available vacancies. In this way, any pressure
on the level of wages is avoided and the labour market tends to adjust by itself’.22
Thus the ETP was right from the beginning of the process of European integration a
precondition for the process itself, in that it made sure that the functioning of the host MSs
labour market would not suffer any significant distortion as the consequence of an increase
in the supply of migrant labour. Of course, as the quote above reminds us, the precondition
to the precondition was that the law of the State and trade union action had to uphold the
ETP.23 At the same time, the ETP serves to support the mandatory nature of host MS labour
law. So, to sum up, strong labour market institutions and the ETP were almost seen as an
economic and political precondition to free movement of workers.
The ETP also has a strong dignitarian justification, further corroborated by the recognition of
the concept of equality as a general principle of EU law, and of the concept of nondiscrimination as the main building block of EU Citizenship. We are all familiar with the
assertion by the Court that ‘the economic aim pursued by Article [157] of the Treaty, namely
the elimination of distortions of competition between undertakings established in different
Member States, is secondary to the social aim pursued by the same provision, which
constitutes the expression of a fundamental human right’.24 This line of reasoning applies
not just to the sphere of sex equality, but to the ETP in general, and the ETP in the free
movement of workers context in particular. As noted by McCrudden and Prechal
‘While equality and non-discrimination, in particular non-discrimination on grounds
of nationality, began as a means of securing market integration, by now it has also
become a method to deliver social policies. Relatively early in the case law of the
ECJ, in particular in cases involving individuals, the nexus between economic
integration and non-discrimination has been weakened in the sense that social
considerations have also been taken on board’25
To put it in simple words, just as it is offensive to a woman’s dignity to receive a lower salary
than a man for doing ‘work of equal value’ so is offensive to a migrant worker’s dignity to
receive a lower pay than a domestic one for doing the same job.
22
Our translation of the original Rapport Des Chefs De Délégation Aux Ministres Des Affaires
Etrangères Bruxelles, 21 avril 1956, at page 89. The quote refers to equal treatment in the context
of salaries, but we suggest that it can equally apply to labour costs at large.
23
Unsurprisingly Article 7(4) of Reg. 1612/68 provided that ‘Any clause of a collective or individual
agreement or of any other collective regulation concerning eligibility for employment, employment,
remuneration and other conditions of work or dismissal shall be null and void in so far as it lays down
or authorises discriminatory conditions in respect of workers who are nationals of the other Member
States’.
24
Joined Cases C-270/97 and C-271/97 Deutsche Post AG para [57].
25
C. McCrudden and S. Prechal, The Concepts of Equality and Non-Discrimination in Europe
(EUROPEAN NETWORK OF LEGAL EXPERTS IN THE FIELD OF GENDER EQUALITY, 2009)
page 6.
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b. ‘Free movement of workers’ and the rise of ‘market access’
It has long been argued that ‘free movement of workers’ (FMW) has been subject to the
increasingly hegemonic influence of the emerging ‘market access’ (MA) approach whereby
even non-discriminatory measures that ‘directly affect … access to the employment market
in other Member States’26 or are ‘liable to hinder or make less attractive the exercise of
fundamental freedoms guaranteed by the Treaty’,27 will be seen as contravening the Treaty,
unless otherwise justified. Barnard has rightly pointed out that this shift ‘may well be
deregulatory if a national rule is found to obstruct trade’.28 In our attempt to address this
point we will develop a number of arguments that seek to advance the descriptive claim
that, in the ‘free movement of workers’ field at least, the ‘market access’ principle does not
necessarily posit a radical departure from the ETP, as admittedly it appears to have done in
other contexts, and in particular in the ‘free movement of services’ context.29 In the
following section 3, we will also suggest that much of what we advance in respect of ‘free
movement of workers’ also applies to the freedom of establishment of natural persons,
although admittedly in this area of free movement the Court of Justice’s jurisprudence has
sought to dismantle some Host-state non-discriminatory measures much more vigorously,
thus pulling ‘freedom of establishment of (natural) persons’ more forcefully towards a
‘country of origin principle’ (COP) approach.
First and foremost, the introduction of the MA test in the ‘free movement of workers’
(FMW) field has not, in our view, displaced the ‘equal treatment principle’ (ETP). If a
discriminatory measure were to be in place in the host member state it would equally
engage the ETP and the MA test, in fact it would engage the latter a fortiori (since a
discriminatory measure would a fortiori cause a hindrance to MA). The ‘access test’ lowers
the threshold where a domestic measure is likely to be caught by EU law, but certainly does
not remove the ETP from the FMW regulatory equation. So at a basic level, ‘market access’ is
not incompatible with the ETP, but actually builds on it. Secondly we feel we can confute the
suggestion that the MA test is inherently linked to the nemesis of the ETP, the ‘country of
origin principle’. This is not just because ultimately, non-discriminatory measures hindering
market access are always susceptible to a relatively broad range of justification,30 nor is it
because of the more cautious approach adopted by the Court in Graf.31 But most
importantly because even in the presence of COP, a national measure of the home member
state could end up hindering ‘market access’, as the Bosman 32 and Olympique33 cases
themselves amply demonstrate.
26
Case C-415/93, Bosman, para 103.
Case C-55/94 [1995] ECR I 4165, Gebhard, para 37.
28
C. Barnard, The Substantive law of the EU (OUP 2010) 263.
29
Case C-255/04, Commission of the European Communities v French Republic [2006] ECR I-05251, is
arguably one of the best examples of this trend as applicable to self-employed professionals offering
temporary services in a Host MS, though more examples are discussed below.
30
See the more recent Case C-325/08, Olympique Lyonnais SASP v Bernard [2010] ECR I-2177,
paragraphs 38-50 of the judgment.
31
Case C-190/98, Graf v Filzmoser Maschinenbau GmbH [2000] ECR I-493. See the insistence on the
measure causing an ‘actual’ rather than a hypothetical or ‘uncertain and indirect’ possibility of
hindering market access, at paragraphs 22-25.
32
The transfer fee rule being imposed by the Belgian FA, and Mr Bosman being a Belgian national
playing for a Belgian team and seeking to transfer to a French team.
27
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At a deeper level however, the emergence of a ‘market access’ test may be seen as
challenging our argument in a different way. It could be argued that ‘market access’ also
engages national labour standards of the host MS that, while non-discriminatory in law or
practice, act as a barrier to the entry of foreign workers by restricting their freedom to sell
their labour through contracts or relationships contemplating terms and conditions of
employment that, while in line with their ‘country of origin’ standards, fall below the ones
prevailing in the host MS. Here the ETP is implicitly approached as a minimalistic nondiscrimination obligation for the employer/Host MSs, and one that the worker ought to be
able to opt-out from under EU law for the sake of market access. This is a hypothetical
scenario so far unaddressed by the Court of Justice, but, ex hypothesis this could be applied
to the situation of, say, a Greek university lecturer who is so keen to find a better source of
income that she may be willing to move to, say, Stockholm, and work as an employee of the
University of Stockholm for less than the level of pay set for equally qualified and senior
Swedish academic lecturers by the relevant Swedish collective agreement.34 The one million
Krona question under the MA test is, should the collective agreement be set aside for her
sake (and the sake of ‘market access’)? Or should the ‘equal treatment principle’ prevail in
the sense that the terms of the collective agreement ought to be applied to her (even
enforced against her) as to any comparable Swedish worker? Despite recent case law in the
area of services, it is highly implausible that the CJEU would consider the scenario described
here, or say the high minimum wage in one country or lower weekly working times, as an
unjustifiable barrier to ‘free movement of workers’ (and indeed as a barrier to ‘free
movement of workers’ tout court). The answer to the question would probably not be
affected by the duration of the Greek academic stay in Sweden either. Even a worker
providing her labour for just a few weeks, say under a short fixed term contract, would be
captured by the ETP. We should reiterate that although we are advancing this analysis of EU
law as the descriptively correct one, it must be pointed out that, given the absence of any
precedent elaborating on this set of issue, we are talking both de jure condito (in that we do
not think that Bosman would require setting aside the collective agreement in question)
and, to a certain extent, de jure condendo, in that the Court had yet to adjudicate on a
reference where the worker posited that the Host State’s higher labour standards operated
as a restriction to her ‘free movement of workers’ rights.
We should note that, in the realities of labour markets, the link between being allowed to
work for wages and at working conditions below those commonly applied in the host MS
and market access is not as direct as one could think in abstract. Individuals are often willing
to adapt and to sacrifice pay or seniority for the purposes of, say, working closer to home, or
moving to a different, new workplace that offers better career prospects in the longer run,
or more job satisfaction. These strategies are also used by foreign workers who wish to
penetrate the labour markets, e.g. through applying for less senior positions. This is fully
compatible with the ‘equal treatment principle’ and has little to do with the ‘market access’
33
34
The ‘compensation’ rule being a French rule imposed against a French player seeking to exit his
Home MS to sign a contract with a UK football team.
It should be noted at this point that Swedish law allows trade unions and employers to enter into
collective agreements (and the use collective action on either side to persuade the other to sign such
agreements) and that employers are typically obliged to apply the collective agreement to all
employees.
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test. The employer – once the decision about the appointment is made – would not be able
to treat the foreign worker less favourably than the domestic one, precisely by reference to
the standards on domestic labour sources, be they statutory or collective.
3. Freedom of Establishment of natural persons, the ‘equal treatment principle’ and
‘market access’.
While, in our view, ‘free movement of workers’ (FMW) remains fairly stably anchored in the
‘equal treatment principle’ (ETP), the situation regarding the freedom of establishment of
natural persons (FES/NP), is admittedly more complex. We try to assess the extent to which
FES/NP remains influenced by the ETP but our analysis of the case law concedes that this
area of EU Free Movement law is increasingly drifting away from the ETP and has been
attracted quite visibly within the sphere of influence of the ‘country of origin principle’
(COP), in a way that – in our view – is at odds with what we see are the original rationale and
role of the ETP in the ‘freedom of establishment of (natural) persons’ context.
a. The rationale of the ‘equal treatment principle’ in the ‘freedom of establishment of
(natural) persons’ context
In arguing this point, we need to begin by acknowledging that in the early years of European
integration, the treatment of the self-employed (in the context of freedom of establishment)
may not have been perfectly aligned to that applicable to workers under ‘free movement of
workers’ law. In fact the Spaak Report sought to ‘distinguish free movement of workers from
the free movement of persons exercising independent professions’, which appeared to its
authors as more ‘closely linked to [the provisions] of services’,35 but for the fact that,
presumably, the latter are by their nature temporary in character. This close link is partly still
reflected in the way the Treaty, in Article 62 TFEU, applies the exceptions to freedom of
establishment to the freedom of services context.
But it seems to us that, in other crucial aspects, the regulation of freedom of establishment
of persons exercising independent professions has been decoupled from that of services and
has been more closely, albeit not fully, aligned to that of ‘free movement of workers’ and to
the ‘eqaul treatment principle’. The Court, in cases like Konstantinidis has clarified that
national rules applying to the exercise and provision of self-employed activities would be
caught by EU law when they place a foreign self-employed worker ‘at a disadvantage in law
or in fact, in comparison with the way in which a national of that Member state would be
treated in the same circumstances’.36 Perhaps most importantly, with the adoption of the
Citizenship Directive in 2004, it is now undisputable that free movement rights apply equally
to ‘workers or self-employed persons’37 and this aspect of the ETP actually applies to ‘all
Union citizens residing on the basis of this Directive in the territory of the host Member
35
Rapport Des Chefs De Délégation Aux Ministres Des Affaires Etrangères Bruxelles, 21 avril 1956, at
page 88
36
Case C-168/91, Kostantinidis v Stadt Altensteig [1993] ECR I-1191, [13].
37
E.g. Article 7 of the Directive.
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State’. Arguably over the years we have seen a growing – and fully justifiable - conceptual
(and regulatory) separation between the sources regulating the freedom of establishment of
natural persons, and the self-employed in particular, and that of legal persons, with the
former category being progressively approximated to the ‘free movement of workers’
regulatory scheme, at least in EU secondary legislation such as Directive 2004/38, and to a
certain extent in provisions such as Article 15(2) of the Charter of Fundamental Rights of the
EU (which crucially also refers to ‘citizens [that] provide services’). A number of EC/EU
secondary instruments introduced to regulate particular categories of ‘freedom of
establishment of (natural) persons’ beneficiaries, have also sought to align more markedly
their treatment to that of workers by reference to the application of Host Member State
rules, and to the exclusions of the ‘country of origin principle’. For instance, as noted by
Wyatt, ‘national rules requiring registration with an appropriate trade or professional body
are presumptively not applicable to those providing services, but applicable to those
established in the Member State in question’.38
We feel that this separation of ‘freedom of establishment of (natural) persons’ from ‘free
movement of services’ in general is a welcome development, in that it recognises that the
personal provision of a certain service, especially when that provision is of a stable and
continuous nature, ought to be regulated along the lines of ‘free movement of workers’ and
its underlying rationales. On the other hand, while the legislative institutions of the EU have,
in our view, sought to approximate the free movement rights of self-employed professionals
to the ones of dependent workers, the CJEU’s jurisprudence has instigated an opposite
jurisprudential dynamic whereby the regulation of ‘freedom of establishment of (natural)
persons’ is increasingly, though in our view not systematically or coherently, aligned to the
‘country of origin principle’, a point that we will further elaborate on below in subsection b.
b. Freedom of establishment of (natural) persons and the rise of MA
This subsection seeks to elaborate further on the precise location of freedom of
establishment of (natural) persons on the ETP-COP spectrum, mostly by reference to the
Court’s analysis of the impact that non-discriminatory Host MS’s professional standards on
the establishment of persons exercising independent professions. In a way we are trying to
find an answer to the equivalent ‘freedom of establishment of (natural) persons’
hypothetical scenario discussed in the last paragraph of the previous section 2, in the
context of free movement of workers (the Greek university lecturer moving to Sweden
scenario). We ought to note that, in a number of MSs, self-employed professionals are
generally allowed to compete on price in the provision of their services, and minimum wage
legislation does normally not apply to them. However, many Member States still regulate, to
various extents, the activities of self-employed workers, particularly in such matters as
38
A. Dashwood, M. Dougan, B, Rodger, E. Spaventa, and D. Wyatt, European Union Law (6th ed, Hart,
2011), at 554. The original contains a footnote referring to Cases C-215/01 Schnitzer [2003] ECR I14847; Case292/86 Gullung [1988] ECR 111, and contrasting Article 4 of Directive 77/249, on the
provision of services by lawyers, with Article 3 of Directive 98/5/EC on the establishment of lawyers.
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occupational health and safety,39 but also, as the recent Konstantinides40 dispute reminds us,
in respect of the charges that they are allowed to apply to customers or clients.
For the purpose of our present enquiry, this hypothetical scenario or question could be
structured in the following terms. Could a German professional seeking to establish herself
(as opposed to offer temporary services under ‘free movement of services’ arrangement) in
MS X argue that the (non-discriminatory) professional tariffs or fees introduced by the
relevant national professional body of the Host MS hinder her access to the market, and that
she should be free to either ‘undersell’ or ‘overprice’ her personal work or services for the
sake of market penetration/access? We will see that the answer to this question differs, in
our view somewhat unexplainably, from the one provided in the ‘free movement of workers’
context.
We should begin by noting that the question of the compatibility with EU law of professional
fees and tariffs set by national professional bodies is not really a hypothetical question,
although it seems to us that the question has mostly arisen, and has thus been mostly
addressed by the CJEU, in a ‘free movement of services’ context (i.e. when a professional
was established in its country of origin and sought to provide temporary services in the Host
MS) rather that in a ‘freedom of establishment of (natural) persons’ (FES/NP) context. A
suitable starting point for our enquiry ought to be the Court’s judgment in Cipolla,41 which is
in fact a case decided in a ‘free movement of services’ context rather than in a FES/NP one.
The dispute in question arose due to the expectation by a number of Italian lawyers to be
paid by their (Italian) clients the minimum fees set by the Consiglio Nazionale Forense
tariffs, the Italian equivalent of the Law Society of England and Wales. This dispute led to a
reference to the ECJ seeking to ascertain whether ‘the principle of free movement of
services … also appl[ied] to the provision of legal services [and] if so, [whether] that principle
[was] compatible with the absolute prohibition of derogation from lawyers’ fees’,42 or rather
had ‘the consequence of hindering other lawyers’ access to the Italian services market’.43
The Court had no doubts that ‘the prohibition of derogation … from the minimum fees set by
a scale such as that laid down by the Italian legislation [was] liable to render access to the
Italian legal services market more difficult for lawyers established in [another MS]… [and]
therefore amount[ed] to a restriction within the meaning of’ what is now Article 56 TFEU
(then Article 49 TEC), the key ‘free movement of services’ Treaty provision.44 Unless, of
39
C.f. S. Engblom, Self-employment and the Personal Scope of Labour Law – Comparative Lessons
from France, Italy, Sweden, the United Kingdom and the United States (European University
Institute, 2003). http://cadmus.eui.eu/bitstream/handle/1814/4616/2003_Engblom.pdf?sequence=1
40
Case C‑475/11, Konstantinides (of 12 September 2013); cf. also C-565/08, Commission v Italy [2011]
ECR I-2101.
41
Joined Cases C-94/04 and C-202/04, Cipolla and others v Fazari and others [2006] ECR I-11421
42
Ibid, paragraph 15.
43
Ibid, paragraph 14.
44
Paragraph 58 of the judgment. It is worth mentioning that the Opinion of AG Maduro in this case made
a lot of the convergence of the four freedoms in respect of the ‘market access test’, also by reference
to the case of Caixa bank v France, which is a FES case, however one where the establishment of a
company rather than that of a self-employed natural person, was at stake. See para 64 of his
opinion.
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course, the Host MS caould justify that restriction as an ‘overriding requirement relating to
the public interest’.45
This was an important precedent in respect of the application of the market access test to
the free provision of services by self-employed professionals although, we would maintain, a
non-conclusive one in respect of the field of ‘freedom of establishment of (natural) persons’.
In fact, we would argue that the rationale advanced by the ECJ to justify the restriction of
‘free movement of services’ (FMS) by a minimum fee regime46 could hardly apply to a
situation where ‘foreign’ legal service providers are permanently established in the Host MS,
in that the newly established foreign provider would be on a par with a newly established
national provider, say a young solicitor trying to make himself known in the local national
market.
However, in contrast with Cipolla, the more recent case of C-565/08, Commission v Italy
(‘lawyers maximum fees tariffs’)47 engaged with the issue of fees set by national legal
professional bodies in respect of both ‘free movement of services’ and ‘freedom of
establishment of (natural) persons’, with the Commission explicitly arguing that Italy had
‘adopted, in breach of Articles 43 EC and 49 EC, provisions requiring lawyers to comply with
maximum tariffs for the calculation of their fees’.48 In this case, the Court ultimately ruled
that the maximum fee tariffs were actually compatible with both ‘freedom of establishment’
and ‘free movement of services’, but it important to follow the Court’s reasoning to
appreciate what kind of principles are guiding its action.
In paragraphs 45-51 of the judgment, the Court relied on a number of its precedents in the
areas of FMS and FES of legal persons (FES/LP), including Cipolla, to suggest that while
‘measures taken by a Member State which, although applicable without distinction, [could]
affect access to the market for economic operators from other Member States’,49 it was also
important to bear in mind
‘that rules of a Member State do not constitute a restriction within the meaning of
the EC Treaty solely by virtue of the fact that other Member States apply less strict,
or more commercially favourable, rules to providers of similar services established in
their territory’50
and that therefore the Commission’s argument that
‘[maximum tariffs] constitute a restriction within the meaning of the
abovementioned articles in that they are liable to subject lawyers established in
Member States other than the Italian Republic, who provide services in Italy, to
45
See paragraphs 64-69 of the judgment.
‘that [the] prohibition deprives lawyers established in a Member State other than the Italian Republic
of the possibility, by requesting fees lower than those set by the scale, of competing more effectively
with lawyers established on a stable basis in the Member State concerned and who therefore have
greater opportunities for winning clients than lawyers established abroad’. Paragraph 59 of Cipolla.
Emphasis added.
47
C-565/08, Commission v Italy [2011] ECR I-2101.
48
Ibid. Paragraph [23].
49
Ibid. Paragraph 46.
50
Ibid. Paragraph 49, emphasis added.
46
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additional costs resulting from the application of the Italian system of fees, as well as
to a reduction in profit margins and therefore a loss of competitiveness’51
had no automatic purchase, and could only apply if those rules were demonstrably such as
to deprive foreign service providers from accessing the market under conditions of
‘effective competition’,52 which could not be suggested in that particular case as the Italian
fees were sufficiently flexible to allow adequate remuneration for the various types of
services provided by lawyers.
So to summarise this part of our analysis, the Court established in Cipolla that minimum fees
for legal services set by a competent national body produce a restriction of free movement
of services (FMS), and that – unless that restriction can be justified - foreign legal service
providers ought to be allowed to charge lower fees for the sake of market penetration. The
analysis in the ‘maximum fees tariffs’ case however clarified that while the Cipolla reasoning
applied beyond the FMS context to the FES (presumably ‘freedom of establishment of
(natural) persons’ and ‘freedom of establishment of (legal) persons’) one, maximum tariffs
that did not impede effective competition, but simply produce ‘a reduction in profit
margins’53 for foreign service providers, do not necessarily conflict with EU law.
On the basis of our analysis we can provisionally and tentatively conclude that our answer to
the hypothetical question explored in this section of the article could be partly different
from the one offered to the hypothetical question explored in the previous section. While
the ‘academic-employee’ discussed above (in section 2(b)) would not be permitted to
undercut wages collectively (or statutorily, for that matter) agreed within the Host MS for
the sake of market penetration, it can not be ruled out that the CJEU may permit such an
undercutting dynamic in the FES context, under the reasoning adopted in Cipolla. The latter
judgment is of course a FMS cases, but the Court – regrettably, in our view - appears to have
conflated the reasoning applying to FMS and FES cases in this domain, even though the
‘lawyers maximum fee tariffs’ case could be read as suggesting that when it does so it is a bit
more attentive in assessing whether the domestic rule in the Host MS is sufficiently
flexible,54 and is such as to ‘adversely affects access to the [Host MS] market for the services
in question under conditions of normal and effective competition’.55 In this respect, and as
far as personal service providers are concerned, it is also worth mentioning a less well known
case, Commission v France, where the French présomption de salariat for (foreign and
domestic) performing artists (then contained in Article L- 762-1 of the French labour Code),
was held to be in breach of what was then Article 49 of the ECT.
4. Free Movement of Services and the Posting of Workers
We have so far conceded, and given for granted, that ‘free movement of services’ (FMS) is
anchored to the COP principle. But in this section we go on to illustrate a few key precedents
51
Ibid. Paragraphs 48.
Ibid. Paras 51-53.
53
Ibid. Paras 40 and 48.
54
As it was not found to be in the recent case Case C‑475/11, Konstantinides (of 12 September 2013).
55
C-565/08, Commission v Italy [2011] ECR I-2101, para 51.
52
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and, in particular, we move on to analyse the Court’s trajectory in the context of the posting
of workers to suggest that the move to COP has been a partly the result of a slow process
facilitated, if not triggered, by the Court’s interpretation of the primary and secondary FMS
provisions. In our view, the original approach of the Treaty of Rome in the FMS context was
arguably at least partly reliant on the ETP as a (minimum) requirement of nondiscrimination, in that every service provider could ‘temporarily pursue his activity in the
State where the service is provided, under the same conditions as are imposed by that State
on its own nationals’.56 The Treaty also provided a (rather basic and non-exhaustive) list of
types of services, such as activities of an industrial character, activities of a commercial
character, activities of craftsmen, and activities of the professions. In this respect, it is
important to recall the fairly obvious point that the notion, indeed the very understanding,
of ‘services’ in 1957 must have been dramatically different from the one we have these days.
The six founding MSs were predominantly industrial economies and the very idea of a
‘service economy’ would have appeared as rather fanciful. Unsurprisingly their appreciation
of services was relatively narrow, and the idea that some services could have a significant
cross-border dimension could not reflect our current, on-line era, understanding. Services,
we would readily concede these days, are much more than the four examples mentioned in
old Article 60 of the Treaty of Rome, and one could wonder if, in the era of the Carrefour,
Amazon, Skanska, UBS, Group4S, and Vodaphone, that list reflects the realities of our service
societies.
Eventually, the realities of a more complex services market caught up with the Treaty. In
Rush Portuguesa, the Court found that a company established in one MS providing services
in another MS must not be prevented from doing so by bringing its own workforce. It also
noted however, at paragraph 16, that ‘an undertaking engaged in the making available of
labour, although a supplier of services within the meaning of the Treaty, [can carry] on
activities which are specifically intended to enable workers to gain access to the labour
market of the host Member State’, and therefore, a Host ‘Member States must in such a
case be able to ascertain whether a [foreign] undertaking […] is not availing itself of the
freedom to provide services for another purpose, for example that of bringing his workers
for the purposes of placing workers or making them available’.57 In these circumstances, and
as long as the Host Member States actions were not such as to render free movement of
services rights ‘illusory’, Community law did not preclude the host MS from extending their
legislation or collective agreements ‘to any person who is employed, even temporarily,
within their territory, no matter in which country the employer is established” nor from
“enforcing those rules by appropriate measures”.58 The decision guaranteed service
providers access to the host MS, but at the same time provided the latter with a possibility
to impose ETP.59 De Schutter has rightly noted that Rush ‘was a source of considerable legal
uncertainty at the time it was delivered, for it did not make clear which of the laws of the
56
Article 60 of the Treaty of Rome. .
Case C-113/89, Rush Portuguesa, para 17.
58
Case C-113/89, Rush Portuguesa, para 18.
59
The more recent judgment in Joined Cases C‑307/09 to C‑309/09, Vicoplus SC PUH et al v Minister
van Sociale Zaken en Werkgelegenheid [2011] ECR I 00453, at para. 36, confirmed that paragraphs
16-18 of Rush Portuguesa, remain good law.
57
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host Member State the service provider established in another Member State had to comply
with’.60
A decade later, the Court however started veering in the direction of COP. In Finalarte, for
instance, it found that the Treaty did not preclude a host MS from imposing national rules
guaranteeing entitlement to paid leave for posted workers, but only on the two-fold
condition that (i) the workers do not enjoy an essentially similar level of protection under
the law of the MS where the employer is established and (ii) that the application of those
rules by the host MS is proportionate to the public interest objective pursued.61 In Mazzoleni
and Portugaia, the imposition of host country minimum wages was tolerated, but only
insofar as they if, considered objectively, provided for the protection of posted workers.62
The adoption, in 1996, of the Posted Workers Directive (PWD),63 sought to clarify the
situation. A product of many compromises, it can be questioned whether it ever did. On the
one hand, it introduced not just a possibility, but a duty to ensure that workers posted from
other MS complied with and enjoyed host MS rules and treatment in a number of areas,
thus bearing a number of ETP traits. On the other hand, it was never quite clear what would
apply to areas of labour law outside of the list of areas referred to in Article 3(1) of the
Directive. According to the wording of paragraph 13 of the Directive’s Preamble, its
provisions laid down a ‘nucleus of mandatory rules for minimum protection’, with Article
3(7) adding that this nucleus did ‘not prevent application of terms and conditions of
employment which are more favourable to workers’. The natural assumption, it seems,
would have been to consider this Directive a ‘minimum harmonization’ type of instrument,
and it was explicitly provided that its adoption was ‘without prejudice to the law of the
Member States concerning collective action to defend the interests of trades and
professions’.64 So it may not be inaccurate to describe the PWD as a mixed instrument in
which dominant elements of ETP coexisted (perhaps unhappily) with some ECJ-backed
features of ‘managed mutual recognition’ to use the expression coined by Nicolaïdis and
Schmidt,65 but as severely qualified by a robust, non-exhaustive, and ‘minimum
harmonization’ list of mandatory requirements, contained mainly in Article 3(1).
As noted above however, Laval, and shortly thereafter Rüffert, changed the nature of the
PWD by transforming it into a de-facto ‘maximum’ or ‘exhaustive harmonization’
instrument, and by anchoring it to the centrifugal force pulling ‘free movement of services’
(FMS) away from its original ETP and increasingly towards a MA with COP rationale. Oddly
60
See the lucid analysis by O. De Schutter, ‘Transborder provision of services and ‘social dumping:
rights-based mutual trust in the establishment of the Internal Market’ in I. Lianos and O. Odudu
(eds), Regulating Trade in Services in the EU and the WTO: Trust, Distrust and Economic
Integration (CUP, 2012), 349-380, at 351.
61
Case C-49/98, Finalarte.
62
Cases C-165/98, Mazzoleni and C-164/99 Portugaia.
63
Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning
the posting of workers in the framework of the provision of services, [1997] OJ L-18/01.
64
Para 22 of the Preamble.
65
We readily acknowledge that in the realities of EU secondary legislation, and in the context of the
PWD, MR may take the form of one or more variants of what Nicolaïdis and Schmidt have aptly
defined as ‘managed mutual recognition’, somehow distancing itself from pure COP, as long as
‘mandatory requirements’ are taken seriously, cf. K. Nicolaïdis and S. Schmidt, ‘Mutual Recognition
“On Trial”: The Long Road to Services Liberalisation’, (2007) 14(4) Journal of European Public
Policy, 717–34.
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enough the same COP rationale that MEPs, and the European civil society, had opposed
during the negotiations of the Service Directive,66 but that the CJEU keeps pursuing through
its interpretation of EU primary and secondary legislation in the FMS context. The move to
the COP approach, we concede, has not been finalised yet, and MSs are to apply Article 3(1)
of the PWD to extend the protections and rights of their domestic labour laws to posted
workers. But the range of rights and their ability to enforce them is no doubt diminishing.
Barnard has also noted the extent to which the interplay between this socially regressive and
market oriented interpretation of the PWD by the CJEU and the Rome I Regulations can
further limit the ability of Host MS to apply their domestic labour legislation to foreign
service providers.67
If our assessment of the interpretation of the PWD is correct, it is difficult to see what the
recently adopted ‘Enforcement Directive’68 could contribute beyond applying some paper
over the cracks opened by the Court of Justice. It is worth noting that Paragraph 23 of the
Preamble explicitly recalls and endorses the CJEU jurisprudence, while Paragraph 19 even
seems to impose a new requirement on Host Member States that ‘Where terms and
conditions of employment are laid down in collective agreements which have been declared
to be universally applicable, Member States should ensure … that those collective
agreements are made generally available in an accessible and transparent way’. Similarly, it
is difficult to see what changes could derive from the new Public Procurement Directive69
that, while mentioning in Article 18(2) that Member States shall ‘ensure that in the
performance of public contracts economic operators comply with applicable obligations in
the fields of environmental, social and labour law established by Union law, national law,
collective agreements or by the international environmental, social and labour law
provisions’, also states, in Paragraph 98 of its Preamble, that these social aspects ‘should be
applied in accordance with Directive 96/71/EC, as interpreted by the Court of Justice of the
European Union and should not be chosen or applied in a way that discriminates directly or
indirectly against economic operators from other Member States or from third countries
parties to the GPA or to Free Trade Agreements to which the Union is party’. In our view,
none of these instruments challenge the reading that the CJEU has given to the PWD,
effectively transforming it into a vehicle for the application of the COP in the cross-border
provision of work related services.
In the following section we offer a critical analysis of the approach adopted by the CJEU
against the spirit, if not also the letter, of the PWD, and offer a number of reasons why some
66
In spite of the controversy caused by the COP in the so-called ‘Bolkestein’ draft Services Directive, it
is arguable that the final versions of the Services Directive maintained strong elements of the
principle. See in particular R. Craufurd Smith, ‘Old Wine in New Bottles? From the 'Country of Origin
Principle' to 'Freedom to Provide Services' in the European Community Directive on Services in the
Internal Market', Mitchell Working Paper Series, 6/2007 1-24 (University of Edinburgh, 2007). See
also C. Barnard, ‘Unravelling the Services Directive’ (2008) CMLRev, 323.
67
C. Barnard, ‘The UK and Posted Workers: The Effect of Commission v Luxembourg on the Territorial
Application of British Labour Law - Case C-319/06 Commission v Luxembourg , Judgment 19 June
2008’ (2009) ILJ, 122.
68
Directive 2014/67/EU of the European parliament and the Council of 15 May 2014 on the enforcement
of Directive 96/71/EC concerning the posting of workers in the framework of the provision of services
and amending Regulation (EU) No 1024/2012 on administrative cooperation through the Internal
Market Information System (‘the IMI Regulation’), [2014] OJ L 159/11.
69
Directive 2014/24/EU of the European parliament and the Council of 26 February 2014 on public
procurement and repealing Directive 2004/18/EC, [2014] OJ L 94/65.
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areas of ‘free movement of services’ (as well as ‘freedom of establishment of (natural)
persons’) ought to be regulated by reference to the same principle underpinning ‘free
movement of workers’, and in particular by reference to a strong ‘equal treatment principle’.
5. Breaking the ‘free movement of services’ monolith – the concept of ‘personal work
and services’ in the ‘free movement of services’ context and the ‘equal treatment
principle’70
As mentioned in the previous section, the Treaty of Rome provided a conceptualisation of
‘services’ that was at best narrow and that, read in 2014, struggles to reflect a number of
developments and nuances emerging from the progressive move of Western Europe
towards an increasingly service oriented society. We conceded that, for all its limitations,
that list also has some benefits and provided some relevant insights into the world of
services, on which the CJEU has however failed to capitalise. The major benefit, for the
purpose of our argument in this article, is that it offered an initial embryonic distinction
between services provided by companies and services provided by persons, essentially
activities of craftsmen and the professions. In spite of this important early intuition of the
Treaty drafters, as noted in the previous section, not much has resulted in terms of an ad
hoc set of rules applying in a distinct manner to personal service providers as opposed to
corporate service providers. Cases like Laval and Commission v France seem to be premised
on the same basic rationales underpinning judgments like Sager and Alpine Investments.71
So the regulation of ‘free movement of services’ (FMS) has developed as rather unitary72
reflecting a rather monolithic understanding of services. We have contrasted this approach
with the one adopted by the ECJ/CJEU, and described in section 2, in the free movement of
workers context. We have also argued that the EU legislator, most visibly in the European
Citizenship Directive, has identified some pockets of regulation of the ‘freedom of
establishment’ area affecting self-employed persons and aligned them with the ‘equal
treatment principle’ (ETP) rationale prevailing in the ‘free movement of workers’ context,
although we noted that the Court’s activity in the ‘freedom of establishment of (natural)
persons’ area has sought to pull this area of EU law away from ETP and to anchor it
increasingly to the ‘country of origin principle’ (COP) prevailing in the ‘free movement of
services’ (FMS) context.
What we will argue in this section is that both the regulation of ‘freedom of establishment of
(natural) persons’ and of some areas of FMS ought to be rebalanced in favour of the ETP
principle prevailing in the ‘free movement of workers’ context to reflect the realities of
70
71
72
This section of the paper partly draws on some arguments that have been developed in discussion
with Professor Mark Freedland, and are embodied in M. Freedland and N. Kountouris, The Legal
Construction of Personal Work Relations (OUP, 2011). Although we are solely responsible for any
errors and omissions in the present article, we gratefully acknowledge his invaluable contribution to
the development of these arguments.
For an analysis of this case law, cf. A. Tryfonidou, ‘Further steps on the road to convergence among
the market freedoms’ (2010) ELRev, 35, and J. Snell, ‘The Notion of Market Access: A Concept or a
Slogan?’(2010) CMLRev, 437.
The only exceptional treatment may arise in the contexts where FMS clashes with domestic taxation.
See Case C-234/03, Viacom [2002] ECR I-8287.
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modern labour and service markets, and the dignitarian concerns affect 21st century Europe.
What we begin to propose in these pages is a different approach to the understanding of
services, and one that builds on the original distinction between corporate and personal
service providers in a more meaningful and purposive manner. We argue, admittedly against
the current state of CJEU’s case-law, that, firstly, the regulation of the freedom of
establishment of self-employed professionals ought to be aligned to ‘free movement of
workers’, as analysed above in section 3 of this article, to form a coherent area of ‘Free
movement of persons’ law (FMP). And secondly, this time against the current state of both
EU law and the Court’s case law, that some service provision currently regulated along the
lines of mainstream EU ‘free movement of services’ FMS law, should be carved out of this
area of the law, and be allowed to follow the rules and rationales developed in the ‘free
movement of persons’ context, to form a broader area of ‘Free movement of personal work
and service’ providers (FMPWS). This by reason of either the fact that the provision of the
services in question is mainly personal in character (and here the examples of the activities
of craftsmen of the professions come to mind) or by reason of the fact that they involve the
cross-border provision of a ‘labour intensive’ service, that is to say of a service where the
cross-border movement of workforce from the home to the host MS constitutes the
predominant element of the service provided.
We begin developing this argument by suggesting that, right from the establishment of the
EEC, it was, or at least it should have been obvious, that not all services were identical and
the cross-border provision of some services raised a number of issues and sensitivities that
were similar to the ones raised by ‘free movement of workers’. For instance, when
discussing services, the Spaak Report highlighted the sensitivity of ‘transport services’ which
were characterised by the fact that, almost by definition, ‘they bring on the territory of
another country the conditions of pay, cost, taxation, that prevail in another [country]’.73 In
our view this quote provides an early recognition of the fact that the provision of certain
cross border services can entail a number of challenges for the host MSs that cannot be
addressed merely by the respect and enforcement of ‘the conditions and charges provided
by the regulations in force in the country in question’,74 let alone by the adoption of a
‘country of origin principle’ (COP) test, and we like to see these concerns as an early
warning of the problematic that, some fifty years later, materialised in the context of the
Laval dispute and litigation, and that the ‘equal treatment principle’ (ETP) is best suited to
address. For the purposes of our argument, ‘transport services’ ought to be seen as an
example of a wider class of services in which are, by their nature, labour intensive and that
ought to be treated by reference to the ETP rather than COP.
Needless to say, the concept of ‘labour-intensive service’ is unclear and debated. A good
starting point however could be found by recognising as labour-intensive those services that
the EU itself treats as such in the context of EU-VAT rules.75 This could be further enriched by
adding those services of a commercial or industrial character where, according to Eurostat,
73
Rapport Des Chefs De Délégation Aux Ministres Des Affaires Etrangères Bruxelles, 21 avril 1956, at
page 43.
74
Ibid, 42
75
See the original list contained in Directive 1999/85. Subsequently this was incorporated in Articles
106-108 & Annex IV of Directive 2006/112/EC.
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labour costs constitute a considerable share of overall costs.76 A much richer, articulate, and
reasoned list of LIS can be found in the 1998 Report of the UK Low Pay Commission, which
included sectors such as cleaning, security, residential care.77 While regional and subsectoral variations are likely to occur, construction, we maintain, ought to qualify as a LIS.78
We finish this section by tentatively suggesting that the PWD may have been originally
conceived precisely to address some of the challenges arising from the provision of what we
have termed here as personal and labour intensive services, although ultimately – partly
because of its drafting, partly because of its interpretation by the Court – it has failed to do
so. The Directive, while a ‘free movement of services’ instrument, was not dealing with any
kind of services, but precisely with those services whose performance and delivery required
the cross-border movement of workers. Undoubtedly, the fact that the workers were
moving across the border to provide a service on a temporary basis, rather than a
permanent one, meant that some of the ‘free movement of workers’ ETP requirements had
to be suitably attuned.79 But the idea that the integration in the Host MS was temporary is,
we believe, quite different from the disingenuous suggestion that ‘posted workers who are
sent to another country to perform a service return to their country of origin after
completing their mission, without at any time joining the labour market of the host Member
State’.80 Surely enough their participation in the host MSs labour market (and indeed in the
Host MS tout-court) is of short duration, but there is no doubt in our mind about their
joining, with a number of implications in terms of their displacement effect on alternatively
available domestic labour. The more intellectually honest view is the one submitted by
Commissioner Spidla noting that the PWD seeks ‘to ensure the freedom to provide services
and to prevent social dumping’.81
6. The Equal Treatment Principle – Protective or Protectionist?
As already remarked, the move away from the ‘equal treatment principle (ETP) and in the
direction of ‘country of origin principle’ (COP) as the governing principle for regulating ‘free
movement of services’ (FMS) has been motivated by a desire to promote market access.
Imposing ETP for the workers of foreign companies providing cross border services has been
seen as hampering the trade in services and, as reported in the introduction, been equated
to ‘protectionism’. The proponents of the ‘protection equals protectionism’ axiom usually
run their argument in two ways. Firstly, they argue that the additional administrative burden
of having to comply with host country labour laws makes it ipso facto less attractive and
more expensive for service providers to sell their services across borders. In addition they
76
Eurostat
relevant
stats
can
be
found
at
http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Labour_cost_at_regional_level
77
http://www.dti.gov.uk/files/file37987.pdf
78
http://www.oecd.org/trade/services-trade/41707878.pdf http://www.oecd.org/std/30036154.pdf
79
And we can see a reflection of this in provisions such as Article 3(2)-(5).
80
Communication from the Commission to the Council, the European Parliament, the Economic and
Social Committee and the Committee of the Regions - The implementation of Directive 96/71/EC in
the Member States COM(2003) 458 final.
81
‘Commission promotes jobs in services sector: posting of workers – less bureaucratic and quicker ‘
IP/06/423, Brussels 4 April 2006.
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suggest that ETP deprives these service providers of their main competitive advantage –
lower unit labour costs.
Differences in unit labour costs are undoubtedly one of the drivers of trade today, not just
trade in services but also trade in general, and trade in goods in particular. For instance
companies will often relocate to countries where producing goods is relatively cheaper
partly because of lower labour costs resulting in lower production costs. Even though the
movement of production from one country to another sometimes generates protests, the
purchasing of cheaper goods imported from other (low wage) countries is generally
accepted, and indeed practiced, by most ‘developed countries’ consumer bases.
Economists tend to analyse trade in services in a similar way to trade in goods, or at least
using trade-in-goods analogies. One such example, useful in the present context, is to make
a distinction between traded goods (mainly manufactured goods) and non-traded goods
(mainly services).82 Technological change, allowing more and more services to be delivered
at a distance, has turned many services that traditionally have been non-traded goods into
traded goods.83 Legal developments, such as the EU freedom to provide services and the
GATS treaty, have further increased the range of tradable goods. From this perspective,
arguing that different principles should guide the regulation of trade in goods and trade in
services, or at least certain parts of the latter, may seem odd, in particular as trade theory
has long seen the export of goods as a way of indirectly exporting labour. From this
economic perspective, buying cheap goods from low wage countries, off-shoring services
and allowing workers from other companies to cross borders to perform services at wagelevels that deviate from those in the country of work are comparable acts. Applying the ETP
to one but not the others would thus be a double standard.84 Playing devil’s advocate, we
could say that if we accept competition by means of unit labour costs in the case of trade in
goods and for some services, why should it not be allowed in other areas?
This presupposes however, that trade in goods and commodities is the relevant term of
comparison. As we have been submitting in this article, in the case of cross-border
provisions of services including the posting of workers, an equally or more relevant term of
comparison is ‘free movement of workers’. The response to the rhetorical question above
can therefore be another question: if we accept the equal treatment principle as the
dominant regulatory principle in the case of ‘free movement of workers’, why should it not
also apply to foreign workers performing exactly the same type of work and services as
comparable domestic workers, with the only difference being the country of establishment
of their employing company?
82
For this distinction e.g. Saint-Paul Gilles, ‘Making sense of Bolkestein-bashing: trade liberalization
under
segmentet
labor
markets’
(2005)
IZA
Discussion
Papers
No
1618.
http://www.econstor.eu/dspace/bitstream/10419/33299/1/488862701.pdf
83
EU lawyers will be familiar with the issues arising from the Doc Morris litigation, case C-322/01,
primarily a case about goods but with strong ‘on-line service’ implications.
84
Some economic research has gone as far as suggesting that having more negative attitudes to wage
competition from posted workers is more common among respondents that are less ‘rational’
Calmfors et al (2009). “Trade in Services and in Goods with Low-Wage Countries – How do attitudes
differ and how are they formed?” SIEPS Report 2009:6.
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Imagine two neighbours, Titius and Caius. They are both construction workers in Member
State A, with the same skills and experience. Both go for six months to MS B to work at the
same construction site, under the same main contractor. The only difference between the
two is that Titius is hired by a subcontractor in the host MS B while Caius is hired by a
subcontractor in their home MS A and then posted to Host state B. Under the current state
of EU free movement law, the host MS is, to a large extent in the name of market access,
obliged to ensure the equal treatment of Titius, who will thus receive the same pay and
other working conditions as other MS A domestic workers. In the case of Caius however, in a
scenario similar to Laval, MS A is prevented from ensuring equal treatment as this would be
considered an undue interference with Caius employer’s market access. So, but for the fact
that they are employed by companies registered in different MSs, Titius and Caius receive
different wages85 in spite of doing exactly the same type of work.
Support for applying the ETP rather than the COP in the situations we describe can also be
found in a number of ‘market shaping’ rationales. Labour law does not only set the
standards for the relationship between employers and workers. It also sets standards for the
competition between different employers and between different workers, as it regulates
what means of competition can be used to compete for business and jobs. In the case of
competition between firms, ‘the ability of one firm to adopt a high-productivity route to
competitive success is limited if its rivals are able to compete on the basis of low pay and
poor working conditions’.86 Labour law and social security set a floor under which wages and
working conditions are not allowed to fall, forcing firms to improve and invest in product
development, technology or management practices. Supiot, referring to the concept of
‘l’égalité entre employeurs’, points to placing different firms on an equal footing as concerns
unit labour costs as one of the essential functions of labour law.87 In the case of competition
between workers, labour law works in essentially the same way, preventing underbidding
and making it easier for workers to enter a high-productivity route, for example through
investing in training. As Barnard has suggested in the context of EU free movement rules,
this type of non-discriminatory labour laws should be understood as rules that merely
‘structure the market’,88 and ought to be treated along the way of other rules, such as tax
rules, seen as performing similar functions.89 Providing, through the ‘free movement of
services’ road, what in practical terms amounts to a possibility of avoiding host MS
mandatory regulation is therefore highly problematic. It is particularly so when this can be
combined with arrangements aimed at finding the tax and social security regimes that are
most favourable to the employer.90
85
A study produced by Swedish LO revealed that the take-home pay of the posted workers involved on
three major projects fell in the range of 55-80 per cent of the pay given to workers that were
employed by analogous national companies performing similar tasks. See C-M Jonsson,
T.Pettersson, H. Löfgren, and K. Arvidsson, När arbetskraftskostnaderna pressar priset – en
genomlysning av offentliga investeringar I infrastruktur (Stockholm, LO, 2010).
86
K. D. Ewing, Working life: A New Perspective in Labour Law (Lawrence and Wishart, London, 1996),
p. 26.
87
A. Supiot, ‘Du bon usage des lois en matière d’emploi’ (1997) Droit Social , 236.
88
C. Barnard, EU Employment Law, (OUP, 2012), 201.
89
C. Barnard, The Substantive Law of the EU (OUP, 2010), 393-5. In a slightly different context see
Cases C-67/96, C-115-117/97 and C-219/97, Albany [2000] ECR I-07111.
90
C.f C.-M. Jonsson, Vinnare och förlorare – Om konkurrens med arbetskraftskostnader inom EU. (LO,
Stockholm, 2013) available at http://mb.cision.com/Public/706/9416736/818ec904da75576a.pdf (Last
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Furthermore, as already suggested, we do not believe that categorising the imposition of the
ETP as protectionist per se is warranted. Clearly, the application of labour law has an effect
on the demand for certain services. Actually, as we have just discussed, that is one of the
things that it is supposed to do. The ETP does not exclude foreign service providers from the
market, it merely requires that they follow the same rules as other actors in the market,
establishing the aforementioned ‘égalité entre employeurs’.
Finally, we believe that the argument that in the absence of ‘a bit of dumping’ the
employees of foreign service providers would be even worse off, as they would have no
work whatsoever, is deeply problematic. 91 It is as unconvincing as the argument that was
often aired, in the 1970s and 1980s, against the introduction of equal pay laws - that ‘equal
pay legislation acts to the disadvantage of women and creates unemployment among
them’.92 Since the introduction of equal pay legislation women’s labour market participation
has only increased, and to the extent that women continue to suffer labour market
disadvantages, the solution is unlikely to be found in more discrimination, but is likely to be
achieved by taking equality issues seriously. Prior to Laval, the ECJ approach appeared to be
more sympathetic to this kind of concern and reasoning, accepting the imposition of host
MS labour law, at least as long as it, considered objectively, provided for the protection of
posted workers.93 In Wolf & Müller, a case in which the court upheld a German system for
joint and several liability in the constructions sector, the referring court
(Bundesarbeitsgericht) raised the issue whether the analysis of the protective intent of the
measures should be affected by the fact that the ‘protection … becomes less valuable
economically if any real chance of obtaining employment in the Federal Republic of
Germany is significantly reduced’.94 The Court answered that ‘it is none the less the case that
a provision [such as the one in the main proceedings] benefits posted workers on the ground
that, to the advantage of the latter, it adds to the primary obligant in respect of the
minimum rate of pay, namely the employer, a further obligant who is jointly liable with the
first debtor and is generally more solvent’.95
A more recent example of this kind of reasoning is a March 2013 ruling from the Norwegian
Supreme Court, regarding, among other things, the compatibility of certain supplements
stipulated in a collective agreement that had been made generally binding with the PWD
and the article of the EEA-agreement which corresponds to article 56 TFEU. Justice
Matheson wrote:
accessed 6 October 2013) and J. Cremers, In Search of Cheap Labour in Europe: Working and living
conditions of posted workers (Brussels: CLR/EFBWW/International Books, 2011), at http://www.clrnews.org/CLR-Studies/Websummary.pdf (Last accessed 6 October 2013)
91
We know, in any case, that posted workers are subjected to various treatments that many would see
as indecent and often unlawful, see A. van Hoek and M. Houwerzijl, Comparative study on the legal
aspects of the posting of workers in the framework of the provision of services in the European
Union (European Commission, 2011) and S. McKay, Study on Precarious work and social rights
(Working Lives Research Institute, 2012) 41-44.
92
As suggested by Conservative MP Mr Nicholas Budgen in the House of Commons debate of 29 July
1982, Hansard HC Deb 29 July 1982 vol 28 cc1219-20.
93
C-165/98 Mazzoleni and C-164/99, Portugaia.
94
C-60/03, Wolf & Müller, [2004] ECR I-9553 para 17 and 39..
95
C-60/03, Wolf & Müller, , para 40
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‘A weaker labour market due to higher costs will always be a risk with measures that are
aimed to give increased social protection, regardless of whether it takes the form of
hourly pay, overtime supplements or additional pay for work away from home. In my
view it is self-evident that such supplements do not lose their character of objective
advantage for the worker even when the increased cost run the risk of reducing the
demand for the service in question.’96
Phrased differently, the argument that an equal treatment guarantee applicable to workers
posted to another MS would amount to protectionism and act against workers’ interests
(perhaps on the basis of a pseudo-Rawlsian reasoning that inequality is permissible to the
extent that it can benefit the ‘worse offs’, a point that we feel adequately addressed by
those arguing that ‘equality is better for everyone’)97 is closely related to the Epsteinian
argument that labour law and social protection unduly interfere with the market and, as
such, harm workers.98 Even though the latter argument does have its proponents, it is far
outside the mainstream debate in Europe and is hardly consistent with the ‘social market
economy’ aspirations enshrined in the EU treaties.
7. Conclusions
The present article has advanced a simple yet highly contested argument, that is to say that
certain types of cross border provisions covered by EU law on FMS should be regulated by
reference to the ‘equal treatment principle’ (ETP), rather – as it is the case at present - than
by reference to a ‘market access’ (MA) principle that increasingly leans towards a misguided
‘country of origin principle’ (COP). We have argued that ETP still plays a central role in the
‘free movement of workers’ context, in spite of the emergence of MA, and that this reflects
the economic and dignitarian preoccupations underlying the creation of an internal market
regulated by different sets of labour laws and standards and where labour is in free
circulation. We have moved on to suggest that the area of ‘freedom of establishment of
(natural) persons’ is contested between ETP based arguments (mostly put forward by the EU
legislative institutions) and some COP elements (mostly endorsed by the CJEU), and that this
are of EU free movement law ought to be more securely anchored to the ‘equal treatment
principle’ regulating ‘free movement of workers’. We have also put forward the more
general argument that those trans-frontiers services that are characterised by their personal
provision or by a certain degree of labour intensiveness ought to be regulated along the
same lines of ‘free movement of workers/persons’, partly as a reflection of their sharing
similar economic and dignitarian rationales. It seems to us that the current development of
‘free movement of services’ law and the general interpretation of the PWD run contrary to
96
STX OSV AS et al vs Staten v/Tariffnemnda Norwegian Supreme Court 5 March 2013 para 115.
See, R. Wilkinson and K. Pickett, The Spirit Level: Why Equality is Better for Everyone (Penguin,
2010); see also J. Stiglitz, The Price of Inequality (Penguin, 2013) and, for a more robust
engagement with some of Rawls’ arguments, G. A. Cohen, Rescuing Justice and Equality (Harvard
University Press, 2008).
98
See R. A. Epstein, Forbidden Grounds: The Case Against Employment Discrimination Laws (Harvard
University Press, 1992).
97
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these arguments, with EU law moving in a direction where the COP is the key regulatory
principle.99
An application of the ‘equal treatment principle’ to the provision of personal and labour
intensive services is more capable of taking into account the economic and dignitarian
concerns that we have explored in this paper. It is suitably capable of ensuring market access
by prohibiting any form of direct and indirect discrimination and acts as a market regulatory
device that encourages economic and business models premised on productivity and
investment in human capital, rather than the exploitation of cheap labour force. It does of
course require the CJEU to look beyond the strict dichotomy of ‘free movement of workers v
free movement of services’, and look behind the corporate veil of various trans-national
provision of (labour intensive) services, to appreciate that what the various ‘Lavals’ are
actually doing is to act as legal vehicles for the free (and unprotected) movement of migrant
labourers. We do understand that this statement may come as an anathema to many. We
draw some (limited) comfort from the fact that, in recent months, the Council of Europe’s
European Committee of Social Rights has effectively embraced the normative approach
suggested in this article, by recalling
‘134. […] that posted workers are workers who, for a limited period, carry out their
work in the territory of a State other than the State in which they usually work,
which is often their national State. The Committee is aware that, in terms of length
and stability of presence in the territory of the so called “host State”, as well as of
their relationship with such State, the situation of posted workers is different from
that of other category of migrants workers, and in particular from the situation of
those foreign workers who go to another State to seek work and to be permanently
embedded there. Nonetheless, the Committee considers that, for the period of stay
and work in the territory of the host State, posted workers are workers coming from
another State and lawfully within the territory of the host State. In this sense, they
fall within the scope of application of Article 19 of the Charter and they have the
right, for the period of their stay and work in the host State to receive treatment not
less favourable than that of the national workers of the host State in respect of
remuneration, other employment and working conditions, and enjoyment of the
benefits of collective bargaining (Article 19§4, a and b [of the European Social
Charter] )100
Questions remain as to whether a similar set of policy goals could be achieved by other
means, for instance through the better drafting or better enforcement of the PWD,101 by
means of less draconian restrictions on the exercise of the right to strike than the ones
implicit in Viking and Laval,102 or through a more socially attuned appreciation on the part of
99
See for instance Article 8(2) of the Rome I Regulation.
European Committee of Social Rights, Swedish Trade Union Confederation (LO) and Swedish
Confederation of Professional Employees (TCO) v. Sweden Complaint No. 85/2012, Decision on
Admissibility
and
Merits,
3
July
2013.
Available
at
http://www.coe.int/T/DGHL/Monitoring/SocialCharter/Complaints/CC85AdmissMerits_en.pdf
101
Directive 2014/67/EU, see above footnote 66.
102
See the now repealed Proposal for a Council Regulation on the exercise of the right to take collective
100
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the CJEU of national labour standards as an objective justification for limiting ‘free
movement of services’. Our view is that none of these alternative or additional strategies are
likely to succeed in the absence of the regulatory compass that we have argued for in the
present article, the ‘equal treatment principle’. We have sought to liberate the ‘equal
treatment principle’ from various yellow and red cards that, from time to time, its detractors
seek to flag up to argue against its legal suitability (for instance for being irreconcilable with
‘market access’), its moral or political appropriateness (by reason of being inherently
‘protectionist’), or its economic desirability (by preventing ‘emerging’ European countries,
and the European economy at large, to grow). Equal treatment has really never harmed
anyone, other than those who, for whatever reason, believe in inequality. It is time, we
think, that both the CJEU and the EU law-making institutions started appreciating it more.
1.
action within the context of the freedom of establishment and the freedom to provide services,
COM(2012) 130 final.
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